FIPS Banks: Review of 2022

Our most recent survey has revealed a year of strong performance for New Zealand’s banking sector, with net profit after tax (NPAT) reaching over $7 billion for the first time in our survey.

The sector experienced an increase in NPAT of $1.06 billion (17.26%) from 2021 to reach $7.18 billion for the year. This compares to an increase of $1.99 billion (47.92%) the year prior.

The key to the success of the banking sector over the year was a $1.53 billion increase in net interest income. This was driven by an increase in net interest margin from 1.97% to 2.10% along with a 5.53% increase in gross loans and advances. Non-interest income also contributed to the increase in NPAT with a to 16.50% ($0.47 billion).

Net interest income saw an increase of 13.19% ($1.53 billion) to $13.13 billion, while interest earning assets saw a proportionally smaller increase of 6.01% ($36.47 billion) to $643.74 billion, resulting in the increase of NIM.

John Kensington

Partner - Audit

KPMG in New Zealand

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"The banks have enjoyed a very good year, on the back of controlled loan growth and margin expansion. They have positioned their businesses to benefit in a rising interest rate market, and their prudent lending policies have continued to allow them to report very low loan losses"

"All banks understand that the next two years are going to be difficult, and that they have a very important role to play to help customers through these times, demonstrating their social licence as they use their strength to assist their customers."

"From a bank profit point of view, going forward we do expect to see flatter earnings and higher impairment growth than we’ve seen for some time."

Financial Institutions Performance Survey

Bank - Review of 2022

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Key Highlights

Net interest income increased by $1.53 billion (13.19%) to $13.13 billion.

Operating expenses (including amortisation) increased by $0.22 billion (3.65%) to $6.35 billion.

Tax expense increased by $0.36 billion (14.93%) to $2.75 billion.

The largest increase in NPAT outside of the big four banks was by Rabobank, rising by $88 million (72.51%) to $209 million.

Impaired asset expense increased by $0.36 billion (168.32%) from a $0.21 billion recovery to $0.15 billion expense.

Non-interest income increased by $0.47 billion (16.50%) to $3.30 billion.

Overall, the largest increases in NPAT came from the big four banks with ANZ increasing by $380 million (19.80%) to $2,299 million, Westpac increasing by $241 million (22.80%) to $1,298 million, ASB increasing by $196 million (15.59%) to $1,453 million, and BNZ increasing by $92 million (6.96%) to $1,414 million

KPMG’s Financial Institutions Performance Survey (FIPS) reports have provided insights into New Zealand’s financial services sector for over 30 years. Each edition presents industry commentary and analysis on the performance of New Zealand registered banks, together with a range of topical articles from industry experts, regulators and our own business leaders.